Website design By BotEap.comIt is generally recognized that a person’s early years, such as the twenties, is the best time to start investing. After all, he has his whole life ahead of him to invest money, which is why so many books on investing, most of them actually, are geared toward twenty-somethings. Fewer are around thirty, and even fewer around forty and retirement. This may be partly why investing in trust deeds is so attractive. In today’s environment of low yields and low interest rates, investing in trust deeds is one of the few investment options that can help you substantially increase the amount of your monthly income. And there is little expense involved. (Although the risk is something else).

Website design By BotEap.comWhat is investment in trust deed?

Website design By BotEap.comDeeds of trust are like a private real estate loan. If you’re a real estate developer (for example) looking to get a quick loan to rehab a property in order to sell it at a profit, deed investors may be your best option. They would give you the loan in the blink of an eye much faster than the bank where it takes lengthy negotiations and heavy tome filing until you get that loan. (As much). The average time is 60 days. Some entrepreneurs can’t wait that long. They need to close that deal and that’s where the deed of trust investor comes in handy. He delivers the required funds within that same week, sometimes that same day at 1/3 of the paperwork and zero stress. The downside is that the borrower pays a much higher rate than he or she would on a mortgage, typically 8-12% (since the investor is taking on more risk).

Website design By BotEap.comHow does it work?

Website design By BotEap.comThe process is such that the buyer works through a third-party loan originator who underwrites and facilitates the loan for one year. Schedules can be rearranged, but typically the borrower makes interest-only payments each month and a balloon principal payment once the loan reaches maturity.

Website design By BotEap.comSo, let’s say you’re the investor and you finance 250,000 at 10% APR, you’ll receive 12 interest payments of $2,083 each, totaling $25,000, and at the end of the year, you’ll get your $250,000 back. However, in the worst case, you pocket the land of the defaulting borrower.

Website design By BotEap.comOther things you’ll want to know…

Website design By BotEap.comThere is no set minimum to invest in a single deed of trust. They can be split, that is, divided into several parts, but loan originators generally prefer to deal with one investor per loan.

Website design By BotEap.comFinding deeds of trust to invest in can be difficult. Your best bet may be to find an experienced broker or adviser with a track record of success. These probably have established relationships with the creators and you can work with them. If you don’t want to hunt for these deals, you can invest in a trust deed fund managed by a professional trustee. These funds currently pay between 8% and 11% per year and have minimum investment amounts starting around $50,000.

Website design By BotEap.comTo gain credibility, you may want to consider applying for a license from the SEC.

Website design By BotEap.comAdvantages of investing in trust deeds

Website design By BotEap.comThe advantages are particularly current now that the Fed is raising interest rates and perhaps raising them further. Investments in trust deeds protect you from rate-rising scams because they are held to maturity and have short durations. You can also use any type of cash to invest. You automatically have the right to foreclose on any property when the borrower has defaulted on the loan. Investing in trust deeds can open the door to other investment opportunities. It also offers an above-average return on investment; expect a typical return of 9 to 14 percent. And, if managed well, this type of investment is safe. This is because it has guaranteed performance.

Website design By BotEap.comDisadvantages of Investing in Trust Deeds

Website design By BotEap.comThe obvious downside is the very likely possibility that your investment will default—that is, the borrower will not pay you back. This happens to about 85% of private money lenders at some point in their lives, some more than others. Redfin, a residential real estate company that provides a web-based real estate database and brokerage services, predicts that it will happen to many more next year when house prices plunge beyond the restrictions.

Website design By BotEap.comRisk management…

Website design By BotEap.comHow can you avoid losing your money? Experts strongly recommend lenders investigate a customer’s credit history and trustworthiness. They also recommend that you research the value of the client’s property and the strange market environment to the point that you physically investigate the building yourself. If you are not ready for this, consider hiring an advisor with experience in this market. Before you invest, review a fund’s portfolio and loan-loss reserves. As with individual trust deeds, you may want to have a professional do this.

Website design By BotEap.comIn shorts…

Website design By BotEap.comNerdWallet, one of the leading investment advice websites, has this to say: If you exercise the proper caution, investments in trust deeds can be a great income generator at a time when investments that produce good returns are few and far between. each other.

Website design By BotEap.comYou may want to consider it.